Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

Income Taxes

Note 7.  Income Taxes

Taxes on income for the second quarter and first six months of 2011 were $5.4 billion and $10.3 billion, respectively, compared with $3.3 billion and $6.4 billion for the corresponding periods in 2010. The associated effective tax rates (calculated as the amount of Income Tax Expense divided by Income Before Income Tax Expense) for the second quarters of 2011 and 2010 were 41 percent and 38 percent, respectively. For the comparative six-month periods, the effective tax rates were 42 percent and 39 percent, respectively.

The increase in the overall effective tax rates in both the quarterly and six-month comparisons primarily reflected higher effective tax rates in international upstream operations. For both comparative periods, the higher international upstream effective tax rates were driven primarily by a reduced effect of non-U.S. tax benefits and increased withholding taxes in the current year periods. Additionally, for the quarterly comparison, foreign currency remeasurement impacts caused an increase in the effective tax rate.

Tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world. For the company’s major tax jurisdictions, examinations of tax returns for certain prior tax years had not been completed as of June 30, 2011. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States — 2007, Nigeria — 2000, Angola — 2001 and Saudi Arabia — 2003.

The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcome of these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. However, it is reasonably possible that developments on tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognized tax benefits within the next 12 months. Given the number of years that still remain subject to examination and the number of matters being examined in the various tax jurisdictions, the company is unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits.